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Can You Profit Buying Dividend Stocks Before Payouts?
Posted By Jim On 12/10/2012 @ 7:15 am In Investing | 1 Comment
Costco, one of my favorite companies (and one I am invested in), announced that it would be paying out a special dividend  that would total more than $3 billion based on the number of shares outstanding. Companies don’t often pay out special dividends but given the uncertainty of tax rates next year, Costco is one of several companies paying out a special dividend in 2012, rather than 2013.
This highlights one of the long running myths of dividend investing – that you can buy a stock just before it pays out the dividend and then profit from it. It’s known as buying the dividend and it doesn’t work.
Unfortunately it’s not true. A broker might tell you that it’s a good strategy but it’s not for two reasons:
If you like a company and want to invest in it, it’s best to do it on the ex-dividend date (the day after the day of record, so you won’t get the dividend) so you pay a lower stock price and avoid taxes what is, ostensibly, getting your own money back.
There are no free lunches!
(Photo: amagill )
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 paying out a special dividend: http://www.reuters.com/article/2012/11/28/us-costco-dividend-idUSBRE8AR0Q220121128
 amagill: http://www.flickr.com/photos/amagill/3367543296/sizes/s/
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